European propane prices drop sharply below naphtha

London (Quantum Commodity Intelligence) - European propane cargo prices are trading $100/mt below naphtha cargo prices for the first time this year, Quantum data shows.

Propane cargo prices into northwest Europe slumped $15/mt on Monday from Friday while naphtha cargo prices fell $3.25/mt.

The spread between the two spot assessments widened to $102.25/mt from $88/mt on Friday.

Backwardation in the nearby propane curve has been unwinding quickly this month, partly amid the seasonal shift in demand from winter to summer.

But the pace of easing backwardation has accelerated following the ramp up of US refining capacity, increasing US propane exports, and Saudi Arabia's cutting of its official contract price for propane this month.

Balance month April propane aper was trading $35.25/mt below naphtha paper, while May paper was trading at $60/mt below on April 7.

On Monday this week, the balance month April and May swaps were trading $102.25/mt and $110/mt below naphtha swaps.

Crack values for naphtha versus front month Brent have also weakened over the same timeframe, dropping from -$2.11/b on April 7 down to -$3.58/b on April 19.

Saudi Aramco set the April propane contract price at $560/mt, down $65/mt from March, the first month-on-month fall after nine straight months of increases.

The structure of the European propane market will switch from nearby backwardation into contango in the summer, according to swaps data.